This is one of the possible theoretical explanations of the event on May 14, 2010 when the stock exchange highly dove down. The exact same theory might be used to describe solid declines during stock market collisions.

On May 14, 2010 the US securities market plunged highly down by defeating all historical documents. The DOW Jones Industrials, S&P 500 and other indexes endured huge losses. Some public firms went down to pennies from $30 and higher. Later, media clarified this event as a computer system mistake, then as a human mistake, than the media revealed that exchanges began to investigate this fall and later everybody forgotten these uncommon incidents. When attempting to understand occasions of the plunge it is advised describing the basics principles of the stock exchange cost motions. The first and one of the most standard regulation of the stock market is that price is driven by supply and demand. If a trader (financier) need to sell a stock she or he sells it at market value. Now, if a trader should to market 10,000 (ten many thousands) shares of a public company he needs to discover a customer who would certainly get these 10 thousand shares. If there is not enough purchasers to cover demand to offer ten thousand shares then the price of this stock drops until there are enough purchasers to acquire these shares. Of course, the securities market runs by billions and 10K is fairly handful which does not considerably impact cost of a stock. The second factor that has to be removed is that there can be two circumstances: clenched fist is when an investor wishes to sell stocks and second when a trader should to market. In very first situation, if rate goes rapidly down (dives) a financier might alter his/her thoughts and choose not to market but wait when the traded stock recovers. 2nd situation generally occurs when a stop-loss is struck or when an investor has actually received a final margin call. Whether it is a stop-loss or margin call it is not an investor which positions an order to offer but a broker and in this instance a position must to be removed (closed) at any sort of feasible market value. Now, returning to Might 14, 2010 you might attempt to visualize that during thedecline huge variety of stop-losses was struck. I am not looking at circumstance with margin telephone calls since in this situation, generally, there are several days up until margin is executed. When stop-losses are attacked, brokers place orders to sell at market value. Now, because of a mistake in computer system, or due to human mistake, as was just as soon as discussed in CNN “operator entered B (Billions) rather than K (thousands)”, or by other factor there were positioned orders to market billions of shares. Given that there were no customers for such huge volume of stocks, cost dove down. One big come by one stock could produce chain reaction. If this stock is specified in the indexes (, DJI,, etc) then this stock's decline drags the indexes down, then various other stocks starts to follow the indexes then new stop-losses are hit and even more sell orders are put on the market and afterwards all repeats again and again and it accelerates into the accident. Kindly bear in mind that all over just an assumption of possible circumstance of May 14th events.

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